Ciscos Suit Against Arista Networks Raises Motivation Questions

Cisco is suing Arista Networks Inc., a networking equipment maker founded by former Cisco employees, for alleged infringement of a number of patented features and copyrighted materials.

The accusations come as Arista makes serious inroads in the cloud, where Cisco still is building its strategy; landing big-name customers; and enjoying high share prices. With that in mind, Cisco’s beef feels similar to that of Juniper Networks’, which leveled a lawsuit against startup rival Palo Alto Networks in 2011. Palo Alto was launched by ex-Juniper Networks staff; the Juniper proceedings dragged on until Palo Alto settled in May of this year for $175 million.

Now, Cisco is taking aim against some of its previous own – Arista’s CEO, board chairman and other workers hail from the tech behemoth. On Dec. 5, Cisco blogged that it had filed a lawsuit accusing 10-year-old Arista of stealing and using Cisco intellectual property related to databases, provisioning, private VLANs and more. Mark Chandler, Cisco’s lead lawyer, said the move came “only after thoughtful and serious consideration.”

“In the 13 years I’ve been general counsel of Cisco, I can count on one hand the number of times we’ve initiated suit against a competitor, supplier or customer,” he wrote.

Dan Scheinman, Arista’s board chairman, refuted the charges in a Dec. 8 blog. (As it happens, Scheinman served as Cisco executive for about 14 years.)

“Arista has been shipping the product for six years with the command line interface in question,” he wrote in a Dec. 8 blog. “Why did Cisco file this lawsuit on a Friday, without any discussions with Arista, and with no visibility from Mr. [John] Chambers? Why now? The answer to that question speaks volumes about the real motivation going on here.”

For Scheinman, the motivation boils down to Cisco fearing Arista’s financial and technological success.

“Cisco’s lawsuit is just like the lawsuits (actual and threatened) brought against it in the ‘90s by Lucent, IBM and Nortel – an attempt by a legacy vendor that is falling behind in the marketplace to use the legal system to try and slow a competitor who is innovating and winning,” he wrote. “The networking industry is in the midst of a revitalization as the value shifts from boxes to cloud networking software (a shift which is causing apparent consternation at Cisco). Arista is winning the software battle in the cloud, so Cisco has chosen to do what others did to it previously and is attempting to use the legal system to cover for its lack of innovation in software.”

Cisco, however, maintains that it has no problem with competition, even from former employees.

“Dozens of Cisco competitors, many founded by former Cisco employees, have sprung up through the years, and we’ve never viewed that by itself as a cause for litigation,” Chandler wrote.

Instead, Cisco just aims to protect its property, he said.

“We are asking for official action to stop Arista’s brazen misappropriation of the fruits of our engineers’ labor, and we will take whatever further steps are needed to block Arista from that misappropriation,” Chandler wrote. “We will stand behind and defend our innovations.”

Regardless of Cisco’s claims to the contrary, Arista’s success does raise questions about the timing of the lawsuit. When Arista went public this past summer, it ended its first day of trading at $60, $17 higher than its opening price. Its 52-week high stands at $94.84. Cisco’s, on the other hand, sits at $27.99. Meanwhile, Arista has made serious inroads with cloud customers including Microsoft, even as Cisco continues to pump billions of dollars into its Intercloud initiative amid a still-weak economy in which customers are reluctant to pay premium prices. Recall that Juniper’s suit against Palo Alto also came as the latter was gaining market traction and threatening to edge out the incumbent.

Next steps on the Cisco-Arista front have yet to be revealed. The outcome of the lawsuit could impact channel partners’ businesses, as both Cisco and Arista sell indirect, but such specifics won’t be known until the proceedings wrap.

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